Forward Guidance at the Zero Lower Bound

17 Pages Posted: 23 Jun 2014

See all articles by Andrew J. Filardo

Andrew J. Filardo

Bank for International Settlements (BIS) - Monetary and Economic Department

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: March 2014

Abstract

Four major central banks have adopted new approaches to policy rate forward guidance with the aim of enhancing the effectiveness of monetary policy at the zero lower bound. In this special feature, we examine these approaches and assess their impact. So far, the forward guidance appears to have led to lower volatility of near-term expectations of the future path of policy rates, but the effects on the level of interest rate expectations and on the responsiveness of financial markets to news are less clear. At the same time, the forward guidance raises a number of significant challenges. How they are managed will ultimately determine the enduring value of this communication tool.

JEL Classification: E52, E58

Suggested Citation

Filardo, Andrew J. and Hofmann, Boris, Forward Guidance at the Zero Lower Bound (March 2014). BIS Quarterly Review March 2014. Available at SSRN: https://ssrn.com/abstract=2457107

Andrew J. Filardo (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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